Rating:

6/10

Patch of Land is a peer-to-peer (P2P) real estate lending marketplace. They automate the loan underwriting, data management and risk assessment processes and provide a platform where accredited and institutional investors seeking high-yield, short-term, asset-collateralized investments can be matched with borrowers seeking more timely and consistent sources of funding for rehabbing properties across America.

Commissions & Fees

6/10

Customer Service

7/10

Ease of Use

7/10

Diversification

7/10

Amount of Deals

6/10

Due Diligence

Patch of Land (PoL) is a crowdfunding real estate platform similar to others we’ve previously reviewed, including Realty Mogul, RealtyShares, Sharestates, RealCrowd and Fundrise. Each of these services is slightly different and typically caters to a specific niche, but they’re all conceptually the same — providing an online technology platform that facilitates a match-up between real estate operators looking to raise capital and accredited investors looking to invest directly in specific brick-and-mortar real estate projects through cash-flowing loans.

Launched in 2013 and headquartered in Los Angeles (with a satellite office in New York City), Patch of Land uses technology and data to provide transparent and low-minimum real estate investing opportunities in both residential and commercial projects.

Investors are able to view the borrower’s real estate project proposal, due diligence documents, ARV/LTV, interest rates and other pertinent information in order to determine whether or not the borrower’s project is a good fit for the investing portfolio. Transparency in all deals allows investors to choose exactly which pre-screened real estate investments fit their investment needs and diversification by yield, term, geography and project or loan type.

Patch of Land Features

Minimum Investment

$1,000

Account Fees

10% of interest fee

Investment Length

1 - 36/months

Accredited Investor

Private REIT

Offering Types

Debt

Property Types

Commercial, Residential, Single Family

Regions Served

46 States; excluding MN, SD, NV and AZ

Secondary Market

Self-Directed IRA

1031 Exchange

Pre-vetted

Pre-funded

Deal Transparency — Like most other real estate crowdfunding sites, PoL provides comprehensive information and documents on each project before and during the process. This allows investors to perform their own due diligence ahead of time, as well as receiving ongoing support, information and updates prior to and after investing.

Short-Term Debt Investments — PoL funds only short-term debt investments, which can be considered safer than equity positions in real estate because they’re in the first position of repayment, should a property lose its value. Most projects are short-term transactional real estate debt for rehab, refinancing and bridge loans.

Pre-funded Loans — PoL pre-funds all deals. The borrower gets funds at closing and can get started with the project immediately. Investors start earning interest the day they invest.

IRA Accessibility — If you have a self-directed IRA, you can invest in Patch of Land deals. At this time, you cannot invest with IRA funds held with a regular broker.

Terms — Most deals are 12-month residential loans. Some commercial loans are for 18 months, and PoL is rolling out a mid-term loan product that has a 36-month duration.

Fees — There is no annual fee for investors or borrowers. PoL takes between 1% and 2% of the interest distributions made by borrowers. PoL does not charge transaction fees or campaign success fees like many crowdfunding platforms do. They work much more like a regular loan marketplace and charge fees for property appraisal, closing costs and origination points that are already factored into each deal listed on the platform.

Access for Non-U.S. Citizens — Most P2RE sites exclude non-U.S. citizens, but PoL is happy to allow investors from around the world as long as they have a U.S. bank account and are accredited by the definition of their country of origin.

Due Diligence and Underwriting Process — PoL implements traditional underwriting procedures, including arm’s-length third-party appraisals that include a full walkthrough and value analysis, pulling comparable data and metrics to evaluate the local market, the performance of that particular asset class in that market, and the risk profile of the borrower.

AutoInvest(New> — PoL’s new AutoInvest feature automatically enters participants into new investment opportunities that meet their pre-selected criteria for as little as $1,000.

How Does Patch of Land Work?

Patch of Land uses traditional underwriting procedures, including arms-length third-party appraisals with a full walkthrough, an evaluation of the local market, the performance of that particular asset class in that market, and the risk profile of the borrower. PoL works with experienced developers and limits funding to manage risk. The guidelines for investment deals are:

Minimum loan amount of $100,000

An LTV (loan to value) up to 80%

An ARV (after-rehab value) up to 70%

Loan duration between one and 36 months

No prepayment penalties

While each property and project varies, Patch of Land’s investments start to accrue interest immediately, which is paid back to investors monthly or quarterly, with a balloon payment of remaining principal and interest at loan maturity.

Most real estate crowdfunding platforms will host a project and wait for it to become fully funded before moving forward with the developer’s rehab work. This is a disadvantage because investors who’ve contributed funds to these potential projects are left waiting for the project to be fully funded while their money sits dormant in a nonperforming investment.

Patch of Land’s business model is to pre-fund all projects before offering them to investors. They go to the closing table with the funds to make the deal happen. They’re so confident in their underwriting criteria and process that they invest 100% in the projects they approve — and get the borrower the funds and approval to move forward that day.

Patch of Land was started by two brothers, Jason Fritton, an e-commerce entrepreneur, and Brian Fritton, a software engineer, and system architect. In April 2016, the company brought on Paul Deitch from Oaktree Capital Management as chief executive officer. Deitch has over 25 years of financial services experience, including risk management, product development, finance, and compliance.

Stats as of July 2017 show that Patch of Land has funded 655 loans, delivering an average rate of return of 11.12% since inception. PoL is a BBB accredited business with an A+ rating.

Screenshots

Patch of Land lets you choose from among a selection of pre-funded real estate deals

Patch of Land offers single-family, as well as multi-family and commercial, investments

Select from pre-funded and pre-vetted properties in Patch of Land's database

Patch of Land's design makes it easy for you to check out your portfolio

For the accredited investor, Patch of Land offers an clear and helpful dashboard

Pros and Cons

Pros

Low Minimum Investment — The minimum investment per deal is only $1,000.

Projects Available Nationwide — Unlike many other P2P platforms that are regionally specialized, PoL currently operates in all but three states (Arizona, Nevada and South Dakota).

Pre-funding — Your money will begin earning interest immediately, instead of sitting in an escrow account waiting for the entire deal to be funded (or possibly being returned to you from deals that never close).

Hands-on Due Diligence — Patch of Land will host on their platform only those projects they believe show promise and are worthy of 100% pre-funding.

Cons

Accredited Investors Only — Like most real estate crowdfunding sites, only accredited investors are eligible.

1–2% Average Investing Fee (Sometimes Even Higher) — High fees eat at your investment returns and, in our opinion, should be avoided.

Taxes — As with all real estate crowdfunding sites, your gains are taxed as ordinary income rather than at the more favorable capital gains tax rate, which could be a major drawback if you are in a high tax bracket already.

Be Aware of Possible Defaults — A few readers have reported experiencing loan defaults on Patch of Land.

Summary

There are many real estate crowdfunding platforms in this young market, each with its own area of expertise. Patch of Land’s niche is focusing on first-position debt loans only (no equity deals) and pre-funding all deals. A distinction that comes across when interacting with the executive team, listening to recorded presentations, and interfacing with their site is they seem sincerely committed (passionate actually) to efficiently and cost-effectively filling the funding gap that’s existed between individual real estate developers looking for short-term loans for their fix-and-flip, bridge loans, and other construction projects and investors who understand the investment value of real estate and want to fund those projects.

Patch of Land’s lending platform achieves their mission to reduce the cost and increase the efficiency of getting these deals approved and funded. If you’re looking to invest in short-term debt with generous yields (the yields posted with each deal are net the 1%–2% fee), then PoL may be right for you. Their pre-funding policy testifies to their rigorous due diligence as they put their own money down to pre-fund 100% of the deals.

RealCrowd is a real estate crowdfunding platform that offers a broad selection of investment opportunities. Is it a good choice for you? Read our review to find out.

Comments

Notify of

Notify of new replies to this comment

Notify of new replies to this comment

Sort by: newest | oldest | most voted

Ruturaj Pathak

3 months 21 hours ago

I have had 2 loan issues with patch of land. I have had 1 loan where interest has not been paid from Feb 2017 and capital has been locked up.

Another loan also has interest and capital locked up since the property is in refinance for over 2 months.

Extremely dissatisfied with patch if lands customer support. No clarity or transparency.

Beware of investing on patch of land.

2

| ReplyHide Replies ∧

Craig

4 months 15 days ago

Patch of Land is not that great compared to the other platforms to be honest. The borrower qualification is written in marketing speak vs credit scores. It has a very very high default rate (as mentioned in the con section) and the customer service is really poor. They don’t even handle the defaults properly compared to the other platforms. (See Tajas’ review). Expect your money to be stuck for years when it defaults.

1

| ReplyHide Replies ∧

Anthony

7 months 10 days ago

@David

Note: Taking .5% from the Interest rate is commonly referred to as a 0.5% or a 50 bps (basis points) fee. Yes, technically 0.5% away from what would otherwise have been an 11% loan to make a net loan of 10.5% APR is a 4.5% reduction but this is simply not how Interest Rates are referred to in the industry vernacular.

My understanding is that many of the other RECF firms – especially the newer ones – take a 1 – 4% fee so a 0.5% or a 50 bps fee is actually very reasonable, FYI.

0

| ReplyHide Replies ∧

Anthony

7 months 28 days ago

I’ve been an investor on Patch of Land for well over 1 year and have invested in approx 12 loans over that time. I’ve also tried others (RS, iF, PS, etc..) and my opinion is that Patch of Land offers the best value.

Their legal structure is the most ‘bankruptcy remote’ as they put it and thus most protective of my funds. They begin paying interest immediately after I invest, and I like they they also invest in the deals along side me too.

I don’t understand those below who are complaining about Defaults – This is the biggest advantage to investing in RECF platforms : The fact that – even in the event of default – your funds are not lost. In fact, you often end up earning way more $$$, at higher interest rates, as I did on 2 of my defaulted investments. (It just takes a little longer)

In short, if you’re not comfortable with some degree of defaults, you should NOT be investing in RECF but rather only in T-Bills.

But if you are willing to assume the inherent risks, as well as enjoy the upside, and like working with an honest, transparent company that works diligently for its customers (in my experience) and has a user-friendly website, Patch of Land is as good as they come, IMHO.

2

| ReplyHide Replies ∧

Tejas

1 year 1 month ago

Been investing on multiple different Cloud Funding platforms for couple of years now. Patch of Land has impressed the way they advertise. However, their default rates is the highest out of all the platforms we have invested. 4 out of 9 different deals we have invested are in default. Also, they consistently make mistakes on the monthly payments, we have issues open for almost 6 months now where they have not resolved missed payment issues. Some of other investors friends have gotten extra payments.

Cross your fingers if you decide to invest with them. Good luck!!!

3

| ReplyHide Replies ∧

Advertiser Disclosure

Investor Junkie has advertising relationships with some of the offers listed on this website. Investor Junkie does attempt to take a reasonable and good faith approach to maintaining objectivity towards providing referrals that are in the best interest of readers. Investor Junkie strives to keep its information accurate and up to date. The information on Investor Junkie could be different from what you find when visiting a third-party website. All products are presented without warranty. For more information, please read our full disclaimer.

Investor Junkie Testimonials

Table of Contents

Helping make finance easy. Investor Junkie is your shortcut to financial freedom. We know that managing finances is not easy. We analyze and compare tools to help you make the best decisions for your personal financial situation.

Stay Connected to Investor Junkie

Investor Junkie is a financial publisher that does not offer any personal financial advice or advocate the purchase or sale of any security or investment for any specific individual. Members should be aware that investment markets have inherent risks, and past performance does not assure future results. Investor Junkie has advertising relationships with some of the offers listed on this website. Investor Junkie does attempt to take a reasonable and good faith approach to maintaining objectivity towards providing referrals that are in the best interest of readers. Investor Junkie strives to keep its information accurate and up to date. The information on Investor Junkie could be different from what you find when visiting a third-party website. All products are presented without warranty. For more information, please read our full disclaimer.